262. (p. 461, figure 17.4) Accountant Alan Wingspan has just finished working on the balance sheet, income
statement, and statement of cash flows for his company. The next step in the accounting cycle will involve:
D. placing the data used to construct the statements into an archive known as a data warehouse.
263. (p. 462) Oklahoma Chemicals plans to use its computers to post information from journals to the ledger
instantaneously. One obvious benefit of this technology would be:
A. a reduction in the number of accountants required by the firm.
264. (p. 462) Ralph owns a small business. Some friends have suggested that he should switch from his current
manual accounting system to one that is computerized. Ralph is not certain he wants to use computers in his
small firm’s accounting system. He is concerned about the time it would take in learning the system, and
wonders whether the benefits will justify the costs of setting up the system. As a small business owner, Ralph
would probably find that:
D. such systems actually reduce costs, because they eliminate the need to ever consult with an accountant.
265. (p. 462) Johnson Products is a small manufacturing firm specializing in custom-order tool and die work. One
way that a computerized accounting system could help Johnson Products is by:
D. eliminating the need to perform the three middle steps of the accounting cycle.
266. (p. 463) The three key financial statements of a business are the:
A. ledger, journal, and trial balance.
267. (p. 463) The __________ is an accounting statement that reports the financial condition of a firm at a specific
point in time.
D. trial balance
268. (p. 463) A firm’s ________ reports the profit or loss for the firm over a specified time period.
D. bank statement
269. (p. 463) Which financial statement represents what the company owns and owes as of a specific date?
D. trial balance
270. (p. 463) Which financial statement reports the company’s revenues and selling costs over a period of time?
D. trial balance
271. (p. 463) A ___________ provides a summary of money coming into and money going out of a firm in a given
time period.
D. receivables and payables report
272. (p. 464) The balance sheet is composed of the following types of accounts:
A. revenue, expenses, and earnings.
273. (p. 466) A balance sheet lists assets in order of their:
A. dollar value, from smallest to largest.
274. (p. 466) _________ refers to how fast an asset could be converted into cash.
D. Accessibility
275. (p. 466) On a balance sheet, what a firm owes to creditors would be listed under:
D. expenses.
276. (p. 466) The value of what stockholders own in a corporation is called:
A. assets.
277. (p. 463) The fundamental accounting equation states that assets equal:
A. liabilities minus owners’ equity.
278. (p. 466) Which of the following refers to items that can be converted into cash within one year?
A. fixed assets
279. (p. 464-465) Patents and copyrights would be classified as:
D. owners’ equity.
280. (p. 466) Debts that are due in one year or less are classified as:
D. immediate expenses.
281. (p. 466) The value of things you own minus the amount of money you owe others is called:
A. liabilities.
D. owners’ equity
283. (p. 468, figure 17.6) The calculation of revenue minus cost of goods sold will give the firm its:
A. retained earnings.
284. (p. 470) Rent, depreciation, and salaries are all examples of:
285. (p. 469) ________ is the dollar value of what is received for goods sold, services rendered and money
received from other financial sources.
D. Cost of goods sold
286. (p. 471, figure 17.7) A cash flow statement identifies the cash receipts and disbursements for a firm that result:
A. only from its operations.
287. (p. 464) Resources that a firm owns are called:
D. credits.
288. (p. 466) The most liquid asset is:
D. owners’ equity.
289. (p. 464) The balance sheet is set up to show the balance between a firm’s:
D. current assets and current liabilities.
290. (p. 467) The “bottom line” of an income statement shows the firm’s:
291. (p. 470) Expenses a firm incurs for insurance, office salaries, and rent would be classified as:
D. general expenses on a cash flow statement.
292. (p. 466) Debts owed by a business are called:
D. assets.
293. (p. 469-470; Legal Briefcase box) When it comes to the treatment of depreciation and valuation of inventory,
generally accepted accounting principles:
D. require accountants to use one specific method for valuing inventory, but permit several methods for
depreciating fixed assets.
294. (p. 469, Legal Briefcase box) FIFO and LIFO are two common:
A. depreciation strategies.
295. (p. 469, Legal Briefcase box) The LIFO method of inventory valuation bases the cost of goods sold on the cost to the
firm of the:
D. merchandise the firm acquired at the lowest cost.
296. (p. 470) _________ is the systematic write-off of the value of a tangible asset over its useful life.
D. Gross margin allocation
297. (p. 470) Accounting recognizes that assets, such as machinery and buildings, lose value over time.
Accountants will record a portion of the cost of an asset as an expense each year through the use of:
A. asset valuation.
298. (p. 471) The accounting statement that reports cash receipts and disbursements for a business is called the:
A. income statement.
299. (p. 463) Which of the following financial statements will tell what a company owns and owes at one point in
time?
D. trial balance
300. (p. 464) As Hector was packing to return to State University after his summer vacation, he realized that he
owned many valuable things such as a laptop computer, a stereo system, and a DVD player. An accountant
would list all of these as Hector’s:
D. intangibles.
301. (p. 466) Keith will be graduating from Southern State University this year. He has accumulated $18,000 in
student loans during his four years at college. An accountant would classify the loans as:
D. intangibles.
302. (p. 463) If the total assets of a business are $107,000 and its liabilities are $75,000, which of the following
statements is correct?
A. The owners’ equity equals $182,000.
303. (p. 463) Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:
A. net income.
304. (p. 467) Many business decisions are made in hopes of improving a firm’s “bottom line.” Which of the
following financial statements will reflect a firm’s “bottom line”?
D. trial balance
305. (p. 468, figure 17.6) Revenue and net income are terms used in accounting that are:
306. (p. 463) If total liabilities were subtracted from total assets, the residual value remaining would be:
D. current expenses.
307. (p. 463) On December 31, 2001, Virginia Laboratories had assets of $235,000 and owners’ equity of $84,000.
D. paid a dividend of $3.00 per share.
308. (p. 466) Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the
next twenty years. Scott would record this as a __________ on its balance sheet.
A. declining balance asset
309. (p. 470) Which of the following would be classified as a general expense on an income statement?
A. salaries paid to salespeople
310. (p. 469, Legal Briefcase box) During a period of rising prices, FIFO (first in, first out) inventory valuation method
will result in ________ net income figures than would LIFO (last in, first out).
D. less accurate
311. (p. 469, Legal Briefcase box) Retailers attempt to sell older merchandise before more recently acquired merchandise
is sold. The assumptions made by the __________ method of inventory valuation are most consistent with this
approach.
D. accelerated costing
312. (p. 469, Legal Briefcase box) During a period of rising prices, if a firm desired to report a low net income figure in
hopes of reducing their income tax liability, the firm would use the __________ inventory valuation method.
D. average cost
313. (p. 472) Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit,
and then sell the goods to their customers on credit. These companies sometimes have difficulty repaying their
suppliers when customers who buy on credit don’t pay on time. Firms that experience this difficulty need to do a
better job of:
A. generating revenue.
314. (p. 466) At the time the Jepson Plumbing Supply prepared its financial statements, it had several customers
who bought goods over the past three months on its “90 days same as cash” credit plan. These customers had
not yet paid their bills, but they have good credit ratings and Jepson is confident that they will make their
payments on time. The amount these credit customers owe would show up as part of the:
D. unrealized revenue reported on Jepson’s income statement.
315. (p. 466) Ram Publishing, Inc. pays a regular dividend to its stockholders after the payment of taxes. The firm
then reinvests the rest of its earnings into the company. The amount reinvested will increase the company’s:
A. capital cash flows.
316. (p. 464-465) Miko is preparing her homework for her accounting class. She is uncertain as to the proper
handling of patents and copyrights on a firm’s financial statements. Which of the following is correct?
D. Patents and copyrights should be included with the firm’s fixed assets on the balance sheet.
317. (p. 467, Spotlight on Small Business box) The boxed material entitled “Spotlight on Small Business” in Chapter 17
shows you how to see how you stack up financially by measuring your own assets and liabilities so that you can
calculate your:
318. (p. 468, figure 17.6) If a firm can reduce its cost of goods sold and continue to sell its product for the same price,
we would expect the firm to enjoy an increase in its:
A. revenue.
319. (p. 470) McCartney Consulting Group is a management-consulting firm that provides its expertise to
businesses that employ its services. Since it does not hold an inventory of goods or produce any goods itself:
D. its balance sheet will not record any current assets.
320. (p. 472) Cindy is concerned because during the past four months her company has experienced cash
shortages. She knows if this continues, the firm will have difficulties in accomplishing its goals. Cindy is
concerned with:
D. inventory valuation.
321. (p. 472) Our Gang Transfer Company has shown consistent profits over the past five years. However, the
company has recently found itself in financial trouble due to cash shortages. This indicates that:
D. the state of the economy is less important than financial control techniques.
322. (p. 472) Over the past month, Monica noted that she disbursed $6,347 in payments for operations in her travel
agency and received $6,189 in cash receipts for services rendered. She had no cash receipts or disbursements
from investments or financing activities. Thus, Monica had a:
D. tax credit payment.